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You should have 2x your annual salary saved up by the age of 35. This is a tweet marketplace sent out the other day that is getting absolutely massacred online. My question for you is, what do you think of this statement?

Is it attainable or completely unrealistic in your minds?

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3 minutes ago, Bullet Club said:

You should have 2x your annual salary saved up by the age of 35. This is a tweet marketplace sent out the other day that is getting absolutely massacred online. My question for you is, what do you think of this statement?

Is it attainable or completely unrealistic in your minds?

completely ridiculous if you are at the low or high end of the spectrum for different reasons

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2 minutes ago, MathMan said:

completely ridiculous if you are at the low or high end of the spectrum for different reasons

What would you define as low end?

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Hmm... let me think about what I have, I probably have, between my wife and myself, my salary (the higher of the two) saved up. Now that's between various retirement funds and not in something that I can pull the funds from easily without a big penalty at this point. In two years (when I'll be 35), I doubt we'll have double what I make saved up, but 1.3-1.5 times, sure that's possible.

I've love to have more saved up, but we also own a house, so with that, and retirement, and savings, we could probably get cash around 1.5-1.75 of what I make.

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Just now, Bullet Club said:

What would you define as low end?

0 - 1000

 

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Is this strictly savings, or is this also money that has been earmarked for investments and retirement?

If it's the latter, then obviously.

If it's the former, then why? I mean, I have easily 6 months to 1 year in savings for one salary in our family, but why would I need 2 full years? I'm much better off in the long run putting all of that extra money into mutual funds, retirement, buying real estate, etc.

Just my opinion.

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1 minute ago, MWil23 said:

Is this strictly savings, or is this also money that has been earmarked for investments and retirement?

If it's the latter, then obviously.

If it's the former, then why? I mean, I have easily 6 months to 1 year in savings for one salary in our family, but why would I need 2 full years? I'm much better off in the long run putting all of that extra money into mutual funds, retirement, buying real estate, etc.

Just my opinion.

Definitely the latter.

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Posted (edited)
22 minutes ago, Bullet Club said:

Is it attainable or completely unrealistic in your minds?

Yes, no, or anything in between.

Personal finance is (wait for it)...personal. If you're studying to be a neurosurgeon, you may have $500k+ student loans from medical school and still be in residency or a fellowship at 35. Then 2 years later you'll be making somewhere around $750k/year. That person is way off target, but they'll be okay in the end.

If you're a car mechanic and got your job the day after you graduated high school with zero debt, then if you have 18 years of wear and tear on your body you better hope you have more than 2x salary saved, because you aren't going to be able to work until social security. 

 

That is supposed to be a rough estimate. I don't remember the exact numbers, but it's something like

Age   -fold Salary saved

30      1
35      2
...
65      8

So that at 65, with social security, you can support your lifestyle. (Worth noting that if you hit the 35 target and your salary doesn't change, a 7% yearly return should take you to the 65 target with no additional savings. To put it bluntly, this is a crappy rule of thumb at best.)

Also worth noting that salary isn't the best barometer for any of this type of math. Your expenses dictate the size of your nest egg. If you are making $100k/year, but $20k/year is your mortgage, $20k/year is your kid's education, and $20k/year is you building your nest egg, using that $100k/year salary for retirement is insane. You're living on $40k/year of expenses that you'd still project to have (plus more for healthcare and whatnot). 

 

Any financial statement like this is going to get destroyed on the internet because we have a generation of people on twitter who have been priced out of affordable housing and are managing obscene amounts of student loan debt. It's also going to get destroyed on the internet because people, as a population, tend to be wildly wasteful with their money and it's substantially easier to say that this analysis is completely stupid (it is to be fair), than to say "well this target is stupid but I can't ignore that at some point I will need to retire and need to plan my career/spending accordingly".

Without saying too much about my own situation, I'll say I went to college and am on track to meet that goal.

Edited by ramssuperbowl99

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9 minutes ago, MathMan said:

0 - 1000

 

Hourly?

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6 minutes ago, ramssuperbowl99 said:

Yes, no, or anything in between.

Personal finance is (wait for it)...personal. If you're studying to be a neurosurgeon, you may have $500k+ student loans from medical school and still be in residency or a fellowship at 35. Then 2 years later you'll be making somewhere around $750k/year.

If you're a car mechanic and got your job the day after you graduated high school with zero debt, then if you have 18 years of wear and tear on your body you better hope you have more than 2x salary saved, because you aren't going to be able to work until social security.

 

That is supposed to be a rough estimate. I don't remember the exact numbers, but it's something like

Age   -fold Salary saved

30      1
35      2
...
65      8

So that at 65, with social security, you can support your lifestyle. (Worth noting that if you hit the 35 target and your salary doesn't change, a 7% yearly return should take you to the 65 target with no additional savings. To put it bluntly, this is a crappy rule of thumb at best.)

It's going to get destroyed on the internet because we have a generation of people who have been priced out of affordable housing and are managing obscene amounts of student loan debt. It's also going to get destroyed on the internet because people, as a population, tend to be wildly wasteful with their money and it's substantially easier to say that this analysis is completely stupid (it is), than to say "well this target is stupid by I can't ignore that at some point I will need to retire and need to plan my career/spending accordingly".

Without saying too much about my own situation, I'll say I went to college and am on track to meet that goal.

I'm just curious about a more educated areas thoughts. At 26, I'm well over halfway there but I've been pretty lucky. I tend to think that for a decent amount of people it's attainable (obviously not everyone can do this for a variety of reasons) but the majority of people my age that I know are garbage with money.

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6 minutes ago, ramssuperbowl99 said:

Yes, no, or anything in between.

Personal finance is (wait for it)...personal. If you're studying to be a neurosurgeon, you may have $500k+ student loans from medical school and still be in residency or a fellowship at 35. Then 2 years later you'll be making somewhere around $750k/year. That person is way off target, but they'll be okay in the end.

If you're a car mechanic and got your job the day after you graduated high school with zero debt, then if you have 18 years of wear and tear on your body you better hope you have more than 2x salary saved, because you aren't going to be able to work until social security. 

 

That is supposed to be a rough estimate. I don't remember the exact numbers, but it's something like

Age   -fold Salary saved

30      1
35      2
...
65      8

So that at 65, with social security, you can support your lifestyle. (Worth noting that if you hit the 35 target and your salary doesn't change, a 7% yearly return should take you to the 65 target with no additional savings. To put it bluntly, this is a crappy rule of thumb at best.)

Also worth noting that salary isn't the best barometer for any of this type of math. Your expenses dictate the size of your nest egg. If you are making $100k/year, but $20k/year is your mortgage, $20k/year is your kid's education, and $20k/year is you building your nest egg, using that $100k/year salary for retirement is insane. You're living on $40k/year of expenses that you'd still project to have (plus more for healthcare and whatnot). 

 

Any financial statement like this is going to get destroyed on the internet because we have a generation of people on twitter who have been priced out of affordable housing and are managing obscene amounts of student loan debt. It's also going to get destroyed on the internet because people, as a population, tend to be wildly wasteful with their money and it's substantially easier to say that this analysis is completely stupid (it is to be fair), than to say "well this target is stupid but I can't ignore that at some point I will need to retire and need to plan my career/spending accordingly".

Without saying too much about my own situation, I'll say I went to college and am on track to meet that goal.

To add to this, which really is difficult to do (Great writeup Rams), I'd personally say that I'm probably the definition of your "average" Middle-middle class American. I'm a school teacher who has been out of school less than 10 years, I'm debt free, I have 6-12 months saved up in emergency savings, I contribute the average to my retirement (I'm a teacher), and I invest $400 per month in mutual funds, anticipating between a 7-10% annual return (hopefully), have no debt because we aggressively paid off our loans, and 1 car payment and a house payment with 11-12 years left.

I'm sure some will look at this and criticize our approach, say that we should have more in savings, whatever, but this is what's best for us, our career/our lifestyle.

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2 minutes ago, MWil23 said:

To add to this, which really is difficult to do (Great writeup Rams), I'd personally say that I'm probably the definition of your "average" Middle-middle class American. I'm a school teacher who has been out of school less than 10 years, I'm debt free, I have 6-12 months saved up in emergency savings, I contribute the average to my retirement (I'm a teacher), and I invest $400 per month in mutual funds, anticipating between a 7-10% annual return (hopefully), have no debt because we aggressively paid off our loans, and 1 car payment and a house payment with 11-12 years left.

I'm sure some will look at this and criticize our approach, say that we should have more in savings, whatever, but this is what's best for us, our career/our lifestyle.

I don't think many reasonable people would criticize how you've done.

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Just now, Bullet Club said:

I don't think many reasonable people would criticize how you've done.

My wife is currently working 15 hours a week (part time obviously) until our kids go to school, so that's put us in the 1+ income instead of double income, which some would question. However, this is what she really wanted to do and I support her 100% in this. Being a mom is a tough job but crucial. As a result, we've lived off of my income and put all of hers into savings, loans (paid off), investments, and entertainment. Yes, we're losing out on thousands of dollars a year, but our marriage isn't getting strained, we don't have to worry about vetting people for childcare (or paying for it), and we are still living relatively comfortably, although we aren't crazy spenders like most "typical" Americans.

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7 minutes ago, Bullet Club said:

I'm just curious about a more educated areas thoughts. At 26, I'm well over halfway there but I've been pretty lucky. I tend to think that for a decent amount of people it's attainable (obviously not everyone can do this for a variety of reasons) but the majority of people my age that I know are garbage with money.

I mean...as a population, we don't save enough. That's just a fact. 

Instead of tracking a metric like x-fold salary, which (as shown above) basically is only valuable if you assume the person lacks discipline and will spend absolutely everything they make perpetually, track savings rate. Savings rate is calculated as:
SR = (Income - Taxes- Expenses)/((Income - Taxes)

So, Johnny makes $95k/year, with a $5k 401k match and pays $15k in taxes, plus spends $50k/year. Johnny's SR is:
SR = ($95k+$5k - $15k - $50k)/($95k+$5k - $15k) = $35k/$85k = 41%. Johnny is crushing it.

 

I can't stand this guy's writing style, but this an excellent article on why savings rate matters for stuff like this:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

A savings rate of 15% means you can support yourself after 40 years. That's, nominally, where the 15% into retirement rule came from. The savings rates by generation are something like 10% for millennials, 8% for Gen X, and 5% for Baby Boomers (have I mentioned I hate Baby Boomers yet?). 

We don't save enough as a population. A goal of 2x salary could be attainable for a lot of people, but the vast majority of us spend too much.

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Just now, ramssuperbowl99 said:

I mean...as a population, we don't save enough. That's just a fact. 

Instead of tracking a metric like x-fold salary, which (as shown above) basically is only valuable if you assume the person lacks discipline and will spend absolutely everything they make perpetually, track savings rate. Savings rate is calculated as:
SR = (Income - Taxes- Expenses)/((Income - Taxes)

So, Johnny makes $95k/year, with a $5k 401k match and pays $15k in taxes, plus spends $50k/year. Johnny's SR is:
SR = ($95k+$5k - $15k - $50k)/($95k+$5k - $15k) = $35k/$85k = 41%. Johnny is crushing it.

 

I can't stand this guy's writing style, but this an excellent article on why savings rate matters for stuff like this:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

A savings rate of 15% means you can support yourself after 40 years. That's, nominally, where the 15% into retirement rule came from. The savings rates by generation are something like 10% for millennials, 8% for Gen X, and 5% for Baby Boomers (have I mentioned I hate Baby Boomers yet?). 

We don't save enough as a population. A goal of 2x salary could be attainable for a lot of people, but the vast majority of us spend too much.

Oh I'm well aware. Last I checked something like 40% of working families had $0 in savings.

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